Investors Title Company today announced its results for the
quarter ended March 31, 2020. The Company reported a net loss of
$7.0 million, or $3.71 per diluted share, compared with net income
of $6.6 million, or $3.49 per diluted share, for the prior year
period.
Net premiums written increased 34.1% to a quarterly record of
$38.6 million, as purchase volumes remained strong throughout most
of the quarter, and as lower average mortgage interest rates
sustained a jump in refinance activity which began in 2019.
Revenues from non-title services increased 6.7% primarily due to
growth in 1031 exchange services and management services. Despite
these increases, however, total revenues decreased 25.1% to $29.9
million, compared with $39.9 million in the prior year, as a result
of a $14.5 million decrease in the fair value of equity security
investments, compared with a $4.7 million increase in the prior
year. Impacts to the financial markets in the wake of the COVID-19
pandemic resulted in a significant decline in the fair value of the
Company’s equity securities.
Operating expenses increased 21.5% versus the prior year
quarter, primarily resulting from higher agent commissions
commensurate with the increase in premium volume. Claims expense
increased $680,000 from the prior year quarter due to the increase
in premium volume and recognition of less favorable loss
development in the current period.
The above factors resulted in a pre-tax loss of $8.5 million in
the current quarter versus an $8.3 million pre-tax profit in the
prior year period. Excluding the impact of changes in the estimated
fair value of equity security investments, income before income
taxes (non-GAAP) increased 62.8% to $5.9 million in the current
quarter compared with $3.6 million in the prior year period (see
Appendix A for a reconciliation of GAAP to non-GAAP measures used
in this press release).
Investors Title is closely monitoring the COVID-19 pandemic and
the associated impacts on the title insurance industry, and
reacting accordingly. The Company is focused on providing
uninterrupted service to our customers and business partners, and
ensuring the safety and health of our employees. Having been deemed
an essential business, all of our issuing offices are fully
operational and servicing clients. Many of our employees are
working remotely.
One impact of COVID-19 is that technology is becoming even more
important in the industry. To limit personal interactions,
electronic document signing and other tools that enable virtual
loan closings are becoming more widespread. Our technology
investments have greatly enhanced the ability not only for our
agents and business partners to conduct business remotely, but also
the ability of our employees to work remotely.
The ultimate impacts of COVID-19, both on the overall economy
and on our own business, remain uncertain at this time. Predictions
about the impact of the virus on home sales are constantly
evolving, but we expect the volume of transactions to be curtailed
as long as quarantining measures are in place and the economic
repercussions from business closures linger.
Chairman J. Allen Fine commented, “We are pleased to report
strong operational results in the first quarter, despite the
unrealized losses in our equities portfolio. Low interest rates and
a strong economy prior to the impacts of the coronavirus pandemic
contributed to a healthy pipeline which sustained us through the
first quarter.
As the impacts of the coronavirus pandemic continue to weigh
heavily on the economy, the outlook on real estate transaction
levels and mortgage lending remains mixed. Housing certainly will
not be immune to a slowdown as unemployment climbs and quarantine
measures dampen activity. As the impact of the virus subsides and
the fundamentals that underpinned the market reemerge, there should
be strong support for strengthening real estate activity and
values.
Regardless of the current uncertainty in the market, we will
continue to emphasize enhancement of our competitive strengths and
profitable expansion of our market presence.”
Investors Title Company’s subsidiaries issue and underwrite
title insurance policies. The Company also provides investment
management services and services in connection with tax-deferred
exchanges of like-kind property.
-----------------------------------------------------------------------------------------
Certain statements contained herein constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements include, among others, any
statements regarding the Company’s expected performance for this
year, future home price fluctuations, changes in home purchase or
refinance activity and the mix thereof, interest rate changes,
expansion of the Company’s market presence, enhancing competitive
strengths, positive development in housing affordability, the
return to normal real estate market conditions, and the timing
thereof, wages, unemployment or overall economic conditions or
statements regarding our actuarial assumptions and the application
of recent historical claims experience to future periods. These
statements involve a number of risks and uncertainties that could
cause actual results to differ materially from anticipated and
historical results. Such risks and uncertainties include, without
limitation: the severity and duration of the COVID-19 pandemic and
its effects (and the effects of measures undertaken to combat it)
on the economy and the Company’s business; the cyclical demand for
title insurance due to changes in the residential and commercial
real estate markets; the occurrence of fraud, defalcation or
misconduct; variances between actual claims experience and
underwriting and reserving assumptions, including the limited
predictive power of historical claims experience; declines in the
performance of the Company’s investments; government regulation;
changes in the economy; loss of agency relationships, or
significant reductions in agent-originated business; difficulties
managing growth, whether organic or through acquisitions and other
considerations set forth under the caption “Risk Factors” in the
Company’s Annual Report on Form 10-K for the year ended December
31, 2019, as filed with the Securities and Exchange Commission, and
in subsequent filings.
Investors Title Company and
Subsidiaries
Consolidated Statements of
Operations
For the Three Months Ended
March 31, 2020 and 2019
(in thousands, except per
share amounts)
(unaudited)
Three Months Ended March
31,
2020
2019
Revenues:
Net premiums written
$
38,627
$
28,795
Escrow and other title-related fees
1,842
1,322
Non-title services
2,547
2,388
Interest and dividends
1,177
1,256
Other investment income
440
410
Net realized investment (losses) gains
(412
)
790
Changes in the estimated fair value of
equity security investments
(14,458
)
4,670
Other
138
315
Total Revenues
29,901
39,946
Operating Expenses:
Commissions to agents
20,187
15,058
Provision for claims
906
226
Personnel expenses
11,809
11,612
Office and technology expenses
2,415
2,223
Other expenses
3,113
2,514
Total Operating Expenses
38,430
31,633
(Loss) Income before Income
Taxes
(8,529
)
8,313
(Benefit) Provision for Income
Taxes
(1,518
)
1,687
Net (Loss) Income
$
(7,011
)
$
6,626
Basic (Loss) Earnings per Common
Share
$
(3.71
)
$
3.51
Weighted Average Shares Outstanding –
Basic
1,890
1,887
Diluted (Loss) Earnings per Common
Share
$
(3.71
)
$
3.49
Weighted Average Shares Outstanding –
Diluted
1,890
1,896
Investors Title Company and Subsidiaries
Consolidated Balance
Sheets
As of March 31, 2020 and
December 31, 2019
(in thousands)
(unaudited)
March 31, 2020
December 31, 2019
Assets
Cash and cash equivalents
$
25,324
$
25,949
Investments:
Fixed maturity securities,
available-for-sale, at fair value
101,421
104,638
Equity securities, at fair value
47,983
61,108
Short-term investments
15,641
13,134
Other investments
14,229
13,982
Total investments
179,274
192,862
Premiums and fees receivable
12,330
12,523
Accrued interest and dividends
1,243
1,033
Prepaid expenses and other receivables
10,026
5,519
Property, net
9,959
9,776
Goodwill and other intangible assets,
net
10,149
10,275
Operating lease right-of-use assets
4,300
4,469
Other assets
1,513
1,487
Total Assets
$
254,118
$
263,893
Liabilities and Stockholders’
Equity
Liabilities:
Reserve for claims
$
31,407
$
31,333
Accounts payable and accrued
liabilities
27,816
28,318
Operating lease liabilities
4,337
4,502
Current income taxes payable
2,921
1,340
Deferred income taxes, net
3,990
7,038
Total liabilities
70,471
72,531
Stockholders’ Equity:
Common stock – no par value (10,000
authorized shares; 1,891 and 1,889 shares issued and outstanding as
of March 31, 2020 and December 31, 2019, respectively, excluding in
each period 292 shares of common stock held by the Company's
subsidiary)
—
—
Retained earnings
180,535
188,262
Accumulated other comprehensive income
3,112
3,100
Total stockholders’ equity
183,647
191,362
Total Liabilities and Stockholders’
Equity
$
254,118
$
263,893
Investors Title Company and Subsidiaries
Net Premiums Written By Branch
and Agency
For the Three Months Ended
March 31, 2020 and 2019
(in thousands)
(unaudited)
Three Months Ended March
31,
2020
%
2019
%
Branch
$
9,895
25.6
$
7,166
24.9
Agency
28,732
74.4
21,629
75.1
Total
$
38,627
100.0
$
28,795
100.0
Investors Title Company and Subsidiaries
Appendix A Non-GAAP Measures Reconciliation For the Three Months
Ended March 31, 2020 and 2019 (in thousands) (unaudited)
Management uses various financial and operational measurements,
including financial information not prepared in accordance with
generally accepted accounting principles ("GAAP"), to analyze
Company performance. This includes adjusting revenues to remove the
impact of changes in the estimated fair value of equity security
investments, which are recognized in net (loss) income under GAAP.
Management believes that these measures are useful to evaluate the
Company's internal operational performance from period to period
because they eliminate the effects of external market fluctuations.
The Company also believes users of the financial results would
benefit from having access to such information, and that certain of
the Company’s peers make available similar information. This
information should not be used as a substitute for, or considered
superior to, measures of financial performance prepared in
accordance with GAAP, and may be different from similarly titled
non-GAAP financial measures used by other companies.
The following tables reconcile non-GAAP financial measurements
used by Company management to the comparable measurements using
GAAP:
Three Months Ended March
31,
2020
2019
Revenues
Total revenues (GAAP)
$
29,901
$
39,946
Add (Subtract): Changes in the estimated
fair value of equity security investments
14,458
(4,670
)
Adjusted revenues (non-GAAP)
$
44,359
$
35,276
(Loss) Income before Income
Taxes
(Loss) Income before income taxes
(GAAP)
$
(8,529
)
$
8,313
Add (Subtract): Changes in the estimated
fair value of equity security investments
14,458
(4,670
)
Adjusted income before income taxes
(non-GAAP)
$
5,929
$
3,643
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version on businesswire.com: https://www.businesswire.com/news/home/20200505005202/en/
Elizabeth B. Lewter Telephone: (919) 968-2200
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